Kenya's largest bank set to merge with National Bank of Kenya

Kenya’s largest commercial bank by assets, Kenya Commercial Bank (KCB) is set to acquire one of Kenya’s most trouble banks.

KCB has presented an offer to buy the troubled National Bank of Kenya, according documents seen by a local daily.

The Kenya Commercial Bank has formally approached the National Treasury and the National Social Security Fund, the major shareholders of NBK, with a written proposal.

In the proposal, KCB proposes to acquire a minimum of a 70 per cent stake in NBK’s issued capital through a transaction known as a share swap which means that the bank will not have to pay for the shares in cash.

If the deal is approved by relevant regulatory authorities and shareholders, NBK shareholders will be given a stake in the holding company (KCB Group) rather than be paid cash.

Merging is a common business practice where two companies join together to increase their chances of survival in the face of harsh economic environment.

Many reasons may have prompted the move including the capping of interest rates which has significantly reduced banks’ profits.

The move comes barely months after KCB was outsmarted and outbid by Commercial Bank of Africa on the multi billion M-Akiba deal, after CBK snatched the deal from KCB fingertips and run with it.

KCB attractive yearly returns compared to NBK continuous string of losses may also act as an incentive to the Banks shareholders to make the move and join the Lion.

Also read: The lion finally catches up with the agile 'brown' Equity Bank

The merger of two of the largest state-controlled banks, would have serious impact on the local space.

The merger would see KCB become one of the largest banks in East Africa with branch networks scattered across the region giving stiff competition to other local banks.

Its profitability is also set to soar high and give local banks a run for their money.